More On Legal & Compliancefrom The Advisor's Professional Library
- Anti-Fraud Provisions of the Investment Advisers Act RIAs and IARs should view themselves as fiduciaries at all times, whether they meet the legal definition or not. Deviating from the fiduciary standard of full disclosure while courting clients may cause the advisor significant problems.
- Do’s and Don’ts of Advisory Contracts In preparation for a compliance exam, securities regulators typically will ask to see copies of an RIAs advisory agreements. An RIA must be able to produce requested contracts and the contracts must comply with applicable SEC or state rules.
Before breaking for recess until after the election, Congress passed early Saturday a continuing resolution that would nearly flat-line the Securities and Exchange Commission’s (SEC) budget, renewing advisory trade groups’ worries that a House bill calling for a self-regulatory organization (SRO) for advisors will be revived next year.
The House and Senate passed a six-month stopgap spending bill to keep agencies funded through the November elections into spring.
The Financial Planning Coalition—which includes the Financial Planning Association (FPA), National Association of Personal Financial Advisors (NAPFA) and the CFP Board—renewed its call Monday for Congress to support SEC oversight of advisors.
“When Congress convenes, we urge lawmakers to make certain the SEC can carry out and strengthen its monitoring of investment advisers,” the coalition said in a statement. “The SEC is the body most capable of conducting thorough, efficient investment oversight to protect consumers. This is necessary to increase public confidence that will help lead the nation’s economic recovery.”
While the resolution gives the SEC a boost of about $8 million over its FY2012 funding level of $1.321 billion, the SEC had requested $1.566 billion in FY2013, an increase of $245 million above the agency’s FY2012 appropriation. But sequestration threats could reduce the SEC's budget further.
In addition to the continuing resolution’s flat funding, the coalition says the SEC would face even more pressures if mandated cuts are enacted at the beginning of next year through sequestration. The coalition cites a report by the Office of Management and Budget (OMB), which says sequestration would force cuts of $117 million to the SEC, reducing its budget by more than 8%.
The coalition says it believes the SEC is more cost-efficient than, for instance, the creation of a new SRO under House Financial Services Chairman Spencer Bachus’ bill, “which independent studies have noted would substantially raise costs.”
Said the coalition: “Congress can approve the resources the SEC needs to enhance its mission of safeguarding investors, without costing taxpayers a penny. This can be done either by increasing appropriations to the SEC—the SEC is funded by industry transaction fees—or by authorizing the SEC to collect reasonable user fees from investment advisers.”
Rep. Maxine Waters, D-Calif., introduced in late July the Investment Adviser Examination Improvement Act of 2012, which would allow the SEC to collect user fees from advisors to fund their exams in lieu of an SRO.
Barbara Roper, director of Investor Protection at the Consumer Federation of America (CFA), told AdvisorOne in a previous interview that the Waters bill “demonstrates that there is a user fee alternative that can achieve broad support from various stakeholders.” However, “the real question is whether Congress will be able to break the logjam next year and adopt a bill that finally resolves this problem of inadequate investment advisor oversight.”